The end of the year is here! Well not quite; in fact, as I sit here writing this, it is still mid-August, and I am staring at my heavily scorched, crispy yellow lawn, dreaming of rain! Some might comment, therefore, that it is a little early to be considering winter coats, Christmas shopping lists and, of course, flash floods!
I have read many articles about things to do before he end of the year, which are published by mid- December, or worse, I find myself reading them in January, as I wonder what have I missed?!
This is not very helpful but unfortunately all too common, so I am getting a head start, or at least giving you one, if any of my points should be added to your list.
Moving to France
This first one is for those thinking of moving to France early in the New Year. There may be advantages to doing it before the end of the year. Unless your income is very significant in December, it means that you get into the French tax system at the end of the financial year, which is the calendar year.
Doing so means that your first tax demand is vey easy as there is not much (or indeed nothing) to report. Also, the bill might even be zero, giving you a great deal of time to sort out the tax position in the country you are moving from before having a full tax demand from the French authorities.
Conversely, if your new home value is significant, (over €1,800,000) you might want to delay the move to early January, as this will avoid property wealth tax for a year, depending on what tax you are willing to pay. A main home valued at €2,000,000 means tax of around €3,000, which may or may not be deemed significant.
Either way, your moving time needs some thought, sooner rather than later.
Gifting
Well, it is the time for goodwill to all!
If you make gifts to registered (EU based) charities, part, or all, of them can be offset against your next income tax bill, as long as you do it before 31st December. In France, 66% of your gift up to 20% of your income may be deducted (which maybe carried forward for up to five years). This may make both you and your chosen charity, very happy indeed. These gifts need to be declared on your annual tax declaration.
Of course, when it comes to being generous, we must not forget the family, as inheritance tax planning maybe also be important.
You can gift up to €100,000 to each child every 15 years, with no tax at all. Many parents make financial gifts to their children, which can build up to significant sums over their lifetimes, however, they forget to declare them, when not doing so means that they are not omitted from their final inheritance bill, which is a waste.
It is a simple declaration, the “déclarations de dons manuels”, or form 2735-SD, or you can do it on the “impôts” website, following Déclarer un don ou une cession de droits sociaux, in déclarations.
Just make sure that you do it before the end of the year!
As a little addition, some of these gifts start as loans (sorry bank of Mum & Dad) and loans, over €5,000, must also be recorded, ideally, before the end of the year (actually, it can be up to 15th February).
On occasion, we actually see children repay loans to their parents (I appreciate that this is rare … as a parent, I feel your pain) and then the tax office try to tax it as a gift or income, which is easily avoided by registering the loan. This can be done on form 2062 Déclaration de contrat de prêt.
Drawing Money from Your Investments
January comes, along with New Year’s resolutions, and people call us to say they are buying a new car, property, starting new building work, going on globe trotting holiday etc. Could they draw the money in one go from their investments? I lament that had they drawn some just a week ago. They could have split the taxable value in half and significantly reduced their tax bill.
For example, if a married couple draws taxable income of €50,000, they will have significant income tax to pay. If the same couple drew €25,000 each year over two years (in fact over a week, so, for example, 28th December and 2nd January) they would pay none at all! The moral of the story, plan ahead and start before the end of the year. If you are reading this in January, at least the ‘trésor public’ loves you!
When I started this article, I struggled with topics only to end up with pages of possible things to do before the end of the year. There are many important considerations, such as using up allowances, payments to pensions, property allowances, checking all your taxes before the year end, rebalancing investments, clearing out capital gains etc etc. The list goes on.
What have you missed?